economy is strengthening, which is our bet, it going to be hard to make money in other asset classes. equities will deliver real returns. >> because the bond market has to go done? >> yeah. i agree with your point that whatever the broad market expect, it's not going to happen. >> tom, appreciate it. thanks. >> that's all for "squawk box." right now it's time for "squawk on the street." good tuesday morning. welcome to "squawk on the street." eem ca i'm carl quintanilla, jim cramer, david faber. what a show we have today. the dow starts today as another record high. then theres at bond market after being closed for veteran's day, a strong overnight in asia, japan was up 2% but europe is

red across the board on some weak u.k. cpi. respectively sitting at or around new highs, the nikkei logging its best gain in two months. >> apple puts ice new ipad retina on the market. >> and walmart steps up the competition. another record close for the dow. the s&p finishing just a fraction high of the all-time high. the nikkei closes at a high. and up say, jim, the dips are bought again and again and they are. >> a lot of times it's just the intra day dip. something might happen, a piece of data comes out and people say this is my chance.

there's a classic downgrade today of fedex. fedex has been on fire. that deal with amazon and the post office, that is bad for fedex. watch that stock. that will be the tell. it will go down a little and then buyers come in. buyers cannot resist the transports. >> the downgrade of fedex to a market perform, they raise their price target from 136 to 117. they don't even mention the amazon/ups deal. they say the value is outpacing demand -- >> i say that's convincing, i would sell it. d.r. horton reports, america's home builder. it's like america's team the cowboys -- not. and i look at this and say how much is that going to be down because the cancellations are bad, the order are bad in the

district, some areas of the country are bad and, no, it's up. and i sit there and say what did i miss? i don't think i missed anything. i don't think it should be up. it doesn't matter what i think. buyers are using horton as a move. there's my chance, horton. horton who? >> complacency, complacency. >> you hate to use that term because people have been complacent for a while. >> it's working until it doesn't. >> i love this headline in "usa today" today, "waiting for a 10% correction? don't hold your breath." >> i said there you go. it's going to happen. >> from what level? maybe today. today's the day. because today -- what's going on that we should sell today? >> that we should sell today? >> what happened today? because because of hologic missing on

that 3d test, i'm selling. it like, okay, i got to take the money off, i got to get out of this and this thing is too hot. the next thing you know the other guys are up 29%, you're only up 21%. if i go to buy therapeutic, no, that's down. you end up having to buy fedex down a buck and a quarter because that's an opportunity to buy high-quality stocks. >> this they're making moves that don't equate to the underlying business, why should you be buying them? are you getting yourself in a fool's game? >> i think it's the latter. but i think it may not end until january because people want to show exposure. there's mechanics of the market and of money management. >> you want to finish the year with the gainers on your books. >> i've been talking on that on air. there are certain stocks that are anointed that people want to

own. i spoke last night about a whole segment about priceline. i said priceline is doing so well, it's really only selling at 19 times earnings. it happens to have a thousand dollars price tag so people think it's expensive but i think people don't want to part with their priceline. >> if you're somebody who owned the s&p a year ago and you're up a 28% on that investment, that's a great year. why wouldn't you just want to lock it in, enjoy the holiday season. >> always just say, hey, when i was younger, my old hedge fund, yes, the answer would be let's day trade, sell everything, lock in the gain and day trade. that way we can't give it back. i don't hear a lot of people doing that. $ 500 million, it's not like i was day trading $20 million that 10% correction article you showed, that should be a metaphor for me, have i to take

something off the table. and then dish reports a good number and you say that's kind of interesting. then you hear the financials are trading up because the yield curve, maybe i'm underweight in financials and then i'm like okay, i'll do a buy. >> and essentially writing an apology to the american public for a policy he now thinks has done more damage than good. >> i don't see it that way. i think congress has done more damage than good, congress has tried to make up for what the fed has done. lieutenant general melcher from the old itt spinoff, they helped ring the bell yesterday. their numbers are -- he's trying to make do with a very big cut in the defense budget. it's highly unusual. the defense budget is getting cut very big.

it is happening. >> it is happening. it could end up be a trillion dollars over ten years. also if the sequester does tack effe -- take effect next year. >> force reduction. the fed is trying to offset every spending cut except for health care, which nothing can offset. it just too huge. >> that's a big issue at the d.o.d. obviously nationwide. you want to move on? >> sure. i don't want to be a downer. >> you're not being a downer. you're telling everybody to hang in there. >> thank you. i'm using priceline as an example. i saw people buying the jcpenney preferred. >> they're still buying fannie and freddie preferred. >> people are telling me they

hate me and say, jim cramer, i hate you and should i buy fannie? >> i love it when they say focus. >> the guy called me every name in the book and i favorited him. >> apple making its ipad mini with retina display available, and that will be available today. and google will introduce google glass. >> i have a piece this morning on real money. i said apple has gotten so hated. i got the little apple thing

about the retina and i just said, oh. they're not buying stock at 630. there is a propensity right now to despise apple. it's almost as if apple did something wrong. they haven't. they're offering new phones, a wider screen, all the things that samsung beat them with, they have a new patent for at home, japan loves them and the stock is just despised. remember when apple used to go up and everything else went down? it's the anti-market stock. >> hanging in around 518 is a lot different than hanging in around 418. >> true. this has become transocean. it's transocean 2! carl icahn is pressuring tim cook, he pressuring a ring company. if i were tim cook, i would say, hey, listen, carl, the ring business is not really analogous. and we didn't do mccondo.

>> a balance sheet is a balance sheet, capital allocation is capital allocation. >> what are you, a tree is a tree? are you a poet? >> a rose is a rose is capital allocation? >> don't forget that he owned about 6% of transoh scean. he can never own 6% of apple. >> no, he can't. but what should i be excited about if i own apple? the possibility of another meal between tim cook and carl icahn? is that what i'm looking forward to? >> that's where some investors are in their head. >> how about the idea that the products are good and the numbers may be good or it's a good holiday season. you never reveal where they end up eating. >> i'm pretty sure they ate at carl's house. >> they should have gone out,

maybe go to daniel or something, $400 a person. >> i'm told it's 910 on 11/12/13. >> and 1, 1, 1 -- >> it's the loneliest number for people to go out and lick their wounds. >> it's a made-up holiday. >> we should start a holiday! >> we started plenty of them. >> how about that fan tech, that was something we started. arian foster and it got long jackson -- that was bad. got long nfl players who went down. we create things in our country. we create football gambling on players. they create 1, 1, 1. we're all just doing everything

other than making things. >> one thing we're trying to make is some repairs to the philippines. a u.s. aircraft carrier is headed toward the philippines to aid in the relief efforts from last week's deadly typhoon. we go to manila this morning. >> reporter: as day four of the aftermath of typhoon haiyan, it still remains to be seen if any aid is getting through. the road conditions remain dire. accessibility is a real concern for the relief agency. they simply cannot get through because of the down communications, down bridges and limited handling capacity at some of these airports. the good news is this, is that more help is on the way in the form of uss washington and a support group of six other

vessels, also a royal navy vessel is en route from singapore and they will carry with them a much-needed aerial support and backup for their colleagues in the philippine armed services and emergency services as well. the first responders who were in the line of fire here. they were also victims of this huge typhoon that struck on friday. so they are capacity limited as well, and they are stretched to the ground here. the situation remains grim, remains very challenging logistically and in the meantime the situation at ground level with the people who are affected is getting increasingly desperate. back to you now. >> thanks so much. >> tough story. >> and general melcher said you ask the army and military and marines to be cut back and you tell us to go to the fiphilipp s

philippines. it's a very difficult mandate. >> that's true. we have a power packed show for you, including mary jo white, and dan loeb from the deal book conference in the big apple. what might he say about sony, yahoo! george clooney among others? and we'll bring you comments from rays comments. and we'll take you for a renowned interview with carlos ghosn in mexico. and ken burns will tell us how he's benefiting from netflix. and upping the ante as black friday approaches. and one more look at future, that 10-year at 2.77 might give you an idea of what the open will look like. a lot more from post nine when we return. capital to make it happen?

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. offers will continue into friday, guys. this is heating up very quickly. i saw kohl's is going to buy all

the purchases of four randomly selected customers at each store after 8:00 p.m. on thanksgiving. >> my father sold boxes to retail. i said, pop, why don't they open on thanksgiving? my father said there are some days where you're not supposed to work, jim, national holidays where people don't have to work. can i say for a moment if i work at walmart, am i supposed to leave my turkey dinner and go to work? i understand how my father feels. i don't like this. >> as far as i'm aware, amazon is always open. >> that's a big issue. >> and now always on sunday. there is no down time for the consumer anymore. >> what happens to the worker? what happens to the worker? forget that dinner. is it just another day? my mother's right. we used to not work sundays because it was a blue laws day. and suddenly because of amazon the world has changed and suddenly everybody has to work on days that are not right i think. >> it's going to be good for advertising, though.

in "usa today" there are six consecutive full-page color ads from best buy. one page is just wrapping paper. it's just this black wrapping paper. there's no reason for it. it's six full pages of ads. >> what's interesting about best buy, there's not an ad saying they're taking the price target up to 50. this is an arms race and hanukkah falls very early. >> an article today about target and what they're trying to do to combat amazon online. but speaking to a lot of technology people recently, they will continue to make the point that amazon innovates at scale, meaning they can make changes so quickly over an enormous base of business, an enormous enterprise and nobody else can do that. >> costco, which you know very well -- >> downgraded today.

>> on price. i disagree. my charitable trust owns some. but costco has been able to deal with them because they have a card model and can charge less and they have a very good house brand, label. you have to do extraordinary things to beat amazon. remember we thought having to charge tax would be difference. no difference. >> to a large degree prime was stealing a playbook from costco. >> my friends in prime just love it. international paper is a winner of this. but there's other issues about capacity coming along but the ceo, this stuff comes in a corrugated box. that's ip. >> when we come back, we get cramer's "mad dash." a little bit later on, live interview with s.e.c. chair mary

jo white from the conference in new york city. fascinating look at the challenges as she comes into that job. >> she did hire me. she offered me a job a long time ago, private sector. i loved her. >> there's a look at futures and a lot more "squawk on the street" is back in a moment. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the all-new fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades when you open an account. wow...look at you. i've always tried to give it my best shot. these days i'm living with a higher risk of stroke due to afib, a type of irregular heartbeat,

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>> there is a question did they get some benefit from the time warner/cbs dispute? i don't know. the key is the much lower churn. that's what investors are seizing on. any ads, by the way, are very good, though we saw direct also had them. no conference call yet. dispute with disney is something we'll be curious from, the hopper litigation. >> that's a stock. you got cash. >> they keep buying lots of spectrum. we'll talk a little built more about it. i want to get to biotechnical. >> i want to get to the other side of the trade.

sarepta. people believed they had the magic bullet for a horrible disease and the fda says, whole, don't move so fast. the company itself has said, listen, the fda is full bore on what we have going here. remember biotechnical. if you're a one-trick pony and you have only one drug and the fda shuts it down, bingo. this is russian roulette. be very careful. it's why we took all the specks off. >> and you have the likes of gla glaxo, which has genomes -- >> glaxo's down a dollar and unigen had a lead compound and that's been cut. people don't understand this group has been very frothy and not everything goes right. these are not pfizer. glaxo.

drugs go bad, things go wrong. i had francois nato on last week. he's a terrific biotech guy saying you don't understand, a lot of drugs they spend years and years on and they just doesn't make it. that was nps, just so you know. >> we have the opening bell coming your way in four minutes. "squawk on the street" is back right after this. [ male announcer ] what if a small company

became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪

imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. the opening bell is in about a minute. strong day in asia as well, guys. the only down side has been europe. this u.k. inflation number lower than expected. that's becoming a theme. >> rbs was dln graded by goldman. i thought that was a bad move. people are starting to jump off some of the stocks. >> going to get a lot of fed speak today, of course it's all

leading up to yellen on thursday. >> i was doing work on today's show piece and next year. you know what, she's a reality soon. we are going to be talking about her regularly. >> you got that right. there's a look at the s&p. the opening bell down here at the exchange. real estate company remax celebrating its recent ipo. and over at the nasdaq, progress software corporation doing the honors. >> and reality, competitor reality had a good number, there's a sense overall that the housing group is played out, that you can't be in it and yet it's done nothing for the year. i keep wondering at what point do people say the stocks represent value because they're down so much versus the market but people just do not want to go into a group that's related to housing. >> we mentioned d.r. horton in the last half hour. >> hanging in. >> 40 cents did meet.

net orders 2% drop. but given what rates had done in the quarter, jim, are you impressed or not? >> the markets impressed, i'm not because i look to cancellations. people are saying there's just a period of turmoil in the country, things are back on track. existing home sales are better than new because you don't have the problem with the lock-in. the housing market is not oblivious to the fact they had so many good years and they don't want to touch these stocks. >> media stocks. newscorp. you'll talk about dish as well? >> you look at that simple and think newscorp but now we're just talking newspapers and a lot of cash. >> australian newspapers that no one thought about. >> it was not a great quarter. the stock sold off significantly in the after hours. you've got a number of pure plays on the digital play, if you will, for old media, whether

it be newscorp or whether it will be the upcoming time spinoff. obviously the "new york times" is still out there fighting the fight. and then you will have tribune as well. so there will be this universe. this is the best capitalized of them, given how much cash they gave it when they sent it away. >> what would happen if they bought time warner as time inc.? >> there continues to be belief they will be an acquirer. >> aol has done that successfully, they've bought a number of companies and been a buyer of their stocks. these companies have done extraordinarily well with their stocks, better than with their company. >> it's lts ongoing theme in media, use the strong cash flow profile of your business to continue to shrink your

capitalization, increase your eps and. >> it's working. >> perhaps no better place it's been working than there. >> i'm impressed by these companies and their capital allocation. i do understand if you're tim cook, maybe you should look at what jeff has done in terms of putting money into his own stock. it's been rather remarkable. >> do you but you're pretty confident the next year people are going to be watching more or less similar things than they were watching the year before and year before and you're going to put movies out there that people are going to want to watch, whereas with apple and technology, there's no guarantee you'll have any recurring revenue. >> anything that's pure tech you can get blindsided. but you're not going to get blindsided by tnt, people continue to watch, turner broadcast they love and the annuity streams of these, just like the late great steve ross really understood this, really understood the value of content. that was a juggernaut stock when

steve was alive. who can foresee what happens. >> sea world is up about 3.5%. a lot of discussion about whether or not they would convert to a reit. citi does upgrade it in t in part to a buy. >> if you want to play that game, cedarfare had a better number. these theme park guys, they're about the coasters. you probably haven't even been on fairer's fury, that's how far behind you are. >> i've been on a few of them. >> ever been on fire and ice? >> no. i threw up on fire and ice, that's the sign of a good coaster. >> a guy that grew up near i cyclone. >> jungle cruise. >> yeah.

if you got sick on the jungle cruise, something's wrong. >> that's a problem. wolf slayer. you haven't been on any of tease? >> no. where are these? >> have you ever been to magic mountain? >> cork screw. >> apollo's chariot, i threw up on that one. >> can we get you a little checklist going? >> i long for the days when i was able to throw up with my daughter. >> those were good times. >> those were good times. >> let's get to bob pisani and see what's moving on the floor. >> we got a little bit of weakness, biotech, oil services on the weak side. part of this because interest rates are up. we are moving towards 2.8% on the 10-year overnight. mr. fisher was actually on our air over in asia. i believe he's in australia today. he said the fed's balance sheet

had become bloated. he said before that bond buying cannot go on forever. here's what was interesting, though. he was clear that bond purchases might slow down but he also went on to say it doesn't mean that we're going to stop. we'll have less accommodation. i thought that was an interesting little clarification on some of his feelings and i think that moved the markets a little bit to the down side. you guys have been talking about d.r. horton. this is my old beat. i think i know what they're doing and what's going on. the biggest problems that builders have is they're making the earnings numbers but the orders have been a little disappointing. owe orders were down 2% year over year by the cancellation rate was shocking, 31%. it was 24% a while ago. that's a big increase. i think what's going on here is they are letting orders walk away. because i didn't see -- the conference call has not started

yet but i did not see any talk about increases in cutting prices. i didn't hear any talk about massive incentives. i think they're trying to maintain the prices, maintain margins a little bit and everybody else who is demanding incentives, demanding cuts in prices, they're letting them walk away. that's why the cancellation rate has gone up to 31% and that's why they're making the earnings numbers, even though the order is dropped and the cancellation rate was higher. the order did drop and it was a rather surprising number but all the builders are having this particular number. we'll have mary jo white on in just a couple of minutes, mary thompson is going to talk to her. the exchange has just issued a commentary. the exchanges issued a joint statement less than an hour ago. i find it all a little bit

tepid. they reached general recommendations on what they need to do going forward. they've reached "general agreement" on recommendations, they will share best practices on technology updates and no kill switch, no progress. i've been trying to figure out a way to implement systemwide kill switches? that's a clear disappointment. mary jo white coming up. ask her about rules codifying trading technology. i hope you'll ask her about that. >> well, maybe now it's more likely, bob. thank you, bob pisani. let's talk a little about t-mobile this morning because the stock is down. in their last quarterly earnings report the company had given some indication there was a

possibility that they could sell some debt or equity. but few of their investors or shareholder base would have expected they would have sold quite this much, 66.15 million shares being sold, about add 2 billion secondary offering by the company raising the money, increasing the float, by the way, 38%. remember, most of this company is still point by deutsche telecom. what are they going to do with the proceeds? the expectation is they're going to use it potentially to buy more spectrum. it's interesting to note while there is going to be a large auction of spectrum by the government in january, that being the h block, 1,900 block we'll call it, they're not interested in that, at least not that i'm aware because it's not contiguous with what they own. dish, yes. sprint perhaps. not necessarily t-mo. where is the spectrum they conceivably are raising the

money to buy? i don't know. verizon has some spectrum in the 700 which could fit, if it was for sale. some investors scratching their head. some choosing to say i'll sell you right here. of course we still have this theme of consolidation within the industry itself. the question is to whether you will see soft bank and its leader masa to move to gain scale more quickly because he wants scale in the wireless business, he owns sprint but an expectation is he's either going to try again, remember they did in the past with t-mo or move perhaps and take a look at europe. so those are key things to put sort of in some perspective. spectrum is a finite resource. nobody knows that better than charlie ergen at dish. there he is himself.

in terms of subscribers editions, subscribers, everything was good there, that's why that stock is up. they're trying to take control of light squared, they will be a bitter in the h block auction that takes place next keer and then the question for mr. ergen is what do you do now? >> why not more towers? >> that they should own to youers? >> if you're t-mo, why not get more to youers? >> you're just leasing that, aren't you? >> sba was on "mad money," if you want to get some of these hard-to-get areas, you have to put up more transponders. they need the money. these guys need the money to stay in the arms race. >> they're given a reputation as a provider with very fast

service. >> and they're spending a lot on branding and marketing. but they have an unleveraged balance sheet to begin with. let get over to rick santelli in chicago at the cme group. >> thank you. the fixed market is forging toward lowest prices and higher yields. we're up about three basis points to 144 from our 141 on friday and if you're looking at 10s, they're up about 1 basis point. we're basically hovering at the wide that's spread has been since september of 2011. and when you pair up our 10-year against the 10-year in europe, you see a similar kind of breaking away, highly correlated

but more aggressive as the spread between the two is hovering just under 100 basis points. as far as the dollar index, there was a time over the last several weeks where the british pound was on fire and the euro was going a bit in the different direction. from the dollar index intra day chart, we're well off our high levels of the day, still hovering at unchanged to up a bit. it's very important to remember these are the best dollar index levels in a zone since about mid september, which is the same time we last saw 10-year note yields hovering just about two and three quarters. carl, back to you. >> rick santelli, welcome back. come being back, an interview that will get wall street's attention. we'll hear what s.e.c. chair mary jo white has to say. and then dan loeb. "squawk on the street" will be right back. (vo) you are a business pro.

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financial services industry leaders and prominent policy makers gathering in new york city. mary thompson is at that event with mary jo white. >> good morning, carl. we're here with mary jo white. thanks for joining us. >> glad to be here. >> you've already made a significant impact on the s.e.c. how much workd did you have to o when you took the job and make it much more of a tougher regulator? >> i'm enormously impressed with the s.e.c. the staff is tremendous, works very hard, lots of expertise. what i tried to do was they have massive responsibilities to do. i really tried to make us as efficient as we could be. one of the things i did on the

rule makings, which is a large chunk of what some the staff is doing is to create parallel work streams so you didn't have to different companies working on the same rule making. >> one of the reasons people see it as a tougher agency to deal with is your decision to, in some cases, ask for an admission of guilt. when you look at a case, what is it about the case that makes you decide we're going to push for that admission of guilt, even if there's a settlement or not? >> i think when there's a particular need for public accountability, and that can occur in different way, one is particularly egregious offense, large number of investors heart, big risk to a large segment of the marketplace, a need to make certain the public understands about this particular defendant so that for their own protection they don't deal with them again, at least without that knowledge.

the vast majority of our cases will still be settled a no-admit/no-deny protocol, which as served the agencies and law enforcement very well. it's efficient, lots of money can be returned quickly to harmed investors but it's upon in some cases to get those investors. >> to that end you said you'll be satisfied with nothing less than a life time securities band for sac's steve cohen. the firm said it will fight this. how prepared is the s.e.c. to engage in any type of lengthy legal battle? >> sorry to disappoint but that's a case before the administrative law judge and since the committee may sit in judgment on that, i can't comment at all. >> i know you've seen the issues

from the exchange today. some say the proposals they've issued are modest talking about best practices, et cetera. given that you haven't seen them, if they aren't firm enough, robust enough, does the s.e.c. bring up regsei? >> that regulation is very important to move forward irrespective of what we're getting through at the exchanges. they're coming in today. i haven't reviewed them. i'm expecting robust, concrete reports that show us thousand deal with the vulnerabilities we identified in september, whether it was the sips, critical ma

markets or infrastructure. >> when you hear words used such as "best practices" do you think this will be pro bust enough? how will you get them to a place where you feel the regulations be -- or their rules will be strong enough to ensure investor protection? >> i think we all agreed in a productive meeting in september that it's best to have these rules as robust as possible. our staff has been in contact with the exchanges as they've developed them and at the end of the day we all collectively need these to be quite robust. >> there are reports that the volcker rule will be on track by year end. >> we're working very hard with our fellow regulators. other regulators have said it will be by the end of the year. we're engaged to move it forward as promptly as we can.

we're a commission obviously and there are five of us. cftc is the same, they have to be studied very carefully. we're on track to move it quite promptly. >> a lot of period are curious as to the hedgings, how the definition of macrohedge might look like? >> i really can't in particular since we're still in the process of reviewing and doing that rule making. but we're focused on carrying out the statute, as well as focused on the exemption so they're handled as well. >> mary jo white, thank you very much for being with us. carl, we're going to continue this conversation online but for right now i'll toss it back to you. >> very nice, mary. obviously a lot of banks watching closely and a lot of

people are saying, okay, when do the stockholders no longer have to pay these big fines? when will they refer things to the justice department and go after individuals? >> and when will we get a volcker rule? it's just fantasy that exists in the future. >> i think people at home are saying why do people go to jail for insider trading and not go to jail for wrecking the country? she wasn't part of that. she's civil, not criminal. where's holder? why isn't she meeting with holder? >> our thanks to mary for bringing it to us.

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six stocks in 60 seconds. >> d.r. horton? >> it's causing a big move up in the home depots in the world. i think this is rather shocking and counterintuitive but this group is well behind. i'll take it.

>> vjet. >> be careful. blair, citi being skeptical but you can't keep down a 3d printer. >> sotheby's. >> i put this up because we have dan loeb on at 10:20 and stock is cheap on the earnings. >> don't give up on qualcomm. >> nobody is ever willing to give up on qualcomm. always some guy saying buy qualcomm and today it's jefferies. >> what's coming up on "mad money"? >> sometimes you have to put some weight on and go to del frisco's. we have our hunger games week. del frisco's is i think one of the great steak places in the world.

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welcome back to "squawk on the street." our road map begins with the markets, the indices taking a very slight pause after the dow hits a record yesterday. what's coming up next? bridgewater's ray dalio on that in a fumes. >> and the new president of the american postal workers union will join us live. >> and dan loeb is speaking out. we'll hear from him live in about half an hour. first up, though, ray dalio, founder of bridgewater associates, one of the largest head funds spoke at the deal broker's conference in new york. our kay kelly has highlights. >> reporter: good morning from the deal book conference you mentioned. we just came off from hearing

from ray dalio, a guy who really likes to talk academics and how the market works. he gave andrew sorkin a flavor of his recent paper he wrote, which is published on economicprinciples.org. he believes that for the next decade or so equities are going to have about a 4% return, not bad, better than cash, still not terrific, though. he also thinks given all the different macro head winds in this environment, the fed will have hard time raising rates. >> i think over the next ten years, equities will have about a 4% return. as you lower the expected return and you do not lower the expected risk of equities, then increasingly there is a movement more to cash. so as you have a greater appreciation in the price because of that, you have less wealth effect and each increment of wealth effect has less impact on spending. the federal reserve will not be able to raise interest rates for

a number of years. >> so really a bit of a bleak outlook here coming from ray dalio, not terribly bearish but not wildly optimistic either and he explained in more detail why. coming up later, we'll talk about his view for the individual investor, who he thinks will have a rough go of it and why. >> diunderstand ray said the secret to his success was meditation? >> absolutely. he spoke at some length about meditation and said it's absolutely key for clearing the mind. he said honestly overall it's probably the greatest agent of my success over the years. he's been doing it for more than 40 years and he tries to get in two 20-minute sessions every day. >> well, i will have carl give it a try and let us know if there's something to it. >> i think you need a meditation

instru instructor coming to post 9. >> i do, too, for all the guys here. thanks. let's bring in our next guests. good morning. >> good morning. >> jonathan, is ray dalio right, 4% return for equities from here on out? >> i think he's half right. i think the fed will have a hard time getting themselves out of this easy money policy, but i do think equities are going to be a better returning asset class than ray is talking about. >> so in that case the question becomes what do you do to keep people trusting that if they're hearing from a ray dalio and others about the market being fully valued and happier to sit in cash right here? >> i think there's a couple things. first of all, if the general public, i'm not sure that they're listening to ray dalio as much as just watching the stock market go up and haven't participated are increasingly

being left on the sideline and that's more important to them. but we are in a slow growth environment, likely to stay in that environment for longer and that's going to make the environment more challenging for investors and policy makers. >> chad, what do you make of rates moving up here? the 10-year has bounced to 2.8%. what does that imply for what the fed does and the path equities take? >> i think the federal reserve will try to taper on quantitative easing in march but the 10-year will start to movie -- move higher. if you have gdp growth of 2.5%, if you have jobs numbers like we had on friday north of 200,000, you'll get that number. the real challenge will be when the economy starts to hit the self-sustaining recovery and the federal reserve tapers or pulls back, that's going to be a

difficult time for the long end of the yield curve and that's when the equities markets will get quite sloppy. >> i want to take the other side of that. first of all furk look at what's important, it not when the fed starts to taper first but what does this path look like? we're looking at inflation that you could argue it's under 1% if you look at pce. the jobs environment if you look at participation really weak and when the fed began to talk of taper in may, it had an immediate negative impact on housing. and also when you talk about how high can interest rates go, there's only a certain steepness that the yield curve can get to without the fed basically easing up on the short end of the curve. that 3.5 enough, unless the fed will release the short end of the curve -- >> hold on, you're wrong. the spread could go to 3.5% and it has in the pass. what i'm suggesting is that when the economy starts to gradually improve, and by the way, we

don't think the economy will get into a self-sustaining recovery in 2014, but as it starts to gradually improve, you could see the 10-year move a little bit higher. 100 basis points off is not such a great thing and it's not a great phenomenon. it doesn't mean the stock market will correct by 30% but you can get a 10% kind of correction in the meantime. >> jonathan, is there a level absent a taper on the 10-year where you would argue the fed effectively loses control of the bond market? >> i think it really matters why the 10 year's going up. if it's going up because the fed is forcing it higher, then the bond market will have i indigestion and if it's going higher because conditions are stronger, then i think the market will be perfectly fine living with a stronger 10-year and even if it got to 4% if the

fed was comfortable easing because the economy drove it -- not the fed but the economy -- then a 4% yield doesn't scare me at all. >> i'm wondering what it's going to take for the bears to capitulate and turn around much like the end of the summer, throw out the expectations that we had and find out how much higher it can go on the equity side. >> you had multiple expansion with lack of real earnings or credit growth. can you get a bit more where the multiples go 16, 17, 18 times handle but ultimately what you really need to see happen is you need to see credit growth, you need to see wage growth, you need to see capital improvement and capital spending to get this economy going. and the bears are really taking a hit right now ands they because you have the market multiples going higher but you don't have the real earnings

lift that you would hope for. and that's really, you know, their case here. i would be somewhat more cautious at this point. yes, the market can go to 1850 on the s&p but i'd be a little bit more balanced and i would be very careful of how much duration you have in your portfolio. i would start to pare that back. >> jonathan and chad, thank you very much this morning. >> thank you. >> when we come back, billionaire hedge fund manager dan lobe is about to speak out. it's an interview you can't afford to miss. first, find out what u.s. postal workers find out about amazon's plan about sunday delivery. dow is down 17. we're back in a minute.

amazon's teaming up with the u.s. postal service to deliver packages on sunday for amazon's prime users. the chang will be implemented in new york and los angeles and roll out to larger networks in 2014. the question is will amazon be able to save the postal service? we have the new president of the mostal workers union and i believe beginning his new post today, right? >> that's right. it's my first job in office. >> we love inaugurating a new president. great to have you in. do you feel like you've won over on ups and fedex? >> i don't know that we've won one over on anybody.

the american postal workers union and i'm sure the other postal unions are very pleased when the postal service decides to provide greater service to the people of this country. and the sunday delivery with the amazon products is a good step in that direction. it's more service, better service and that's what the post services should be all about. i don't know that it's getting one over on anybody but it's certainly a got step for the postal service and the postal workers. >> absolutely. everybody used the announcement yesterday as a chance to revisit just what the usps has been through, letter volume down 50% in a decade, losing $21 billion in two years. how much do you think this will help make up for some of that? >> it's certainly going to make up some but the real financial woes of the postal service are based on a congressionally manufactured crisis.

where $5.5 billion a year is forced out of the postal funds into prefunding of health care costs 70 years out. so they have to fund health care for workers that aren't even born yet. were it not for the prefunding, the finance of the post office would not be nearly as problematic as they are. and certainly the amazon deal should help. >> the post office has been skipping these payments, though. i mean, it's trying to be quite pro active for calling out these moves. you're there to take charge of workers to ensure their financial health for the decades to come. do you really think this is a smart move? >> a smart move on the part of the postal service with amazon? >> no, a smart move to skip namts are meant to shore up

pension payments down the road? >> no, they're to sure up health plans down the road and the health plans are funded fine for now. it's an absurd mandate on the postal service. no other company or agency has to do that. so the skipping of the payments is the right thing and hopefully congress and the people of the country will move congress to take care of that problem. the post office is actually doing quite well without that payment. it can be vibrant, it should be here for years to come. and these kind of enhanced services like am zons is good and we as the american postal workers union thinks our services can be enhanced on many front. we're advocates of basic postal banking, we're advocates of check cashing so people don't have to go to legal loan sharking on pay day loans and all sorts of licensing, notary. we can be there to serve the people in many, many ways and

the post office can be vibrant for many years to come. >> do you think even incrementally the amazon deal puts aside some risk that we've been discussing for the past year, things like saturday delivery. >> i -- i certainly hope so. but i think the question of pulling back on services, too many services have been pulled back. too many postal closings, too much slowing down of the mail. threats for six days' service. this is. >> and what about the price of a stamp here? do you take a view on that? i understand the post office would like to raise it more but is limited in its ability to do so. >> it is limited under the 2006 law. it's called the paea, i'm sorry.

but stamps go up like everything goes up a little bit and stamps have gone up no more than inflation over the last 30 years and many people believe actually quite a bit less. i think as time goes on, stamps will go up some, as everything goes up some. but it's still a heck of a deal. when the public thinks about what they can get for mailing a letter from one end of the country to the other, stamps are a heck of a bargain. >> yeah. and that forever stamp, one of the great hedges in all of economics. >> that's right. that's right. >> mark, thanks so much. nice to meet you, mark dimondstein. >> thanks very much for having me on. >> the incoming president of the american postal workers union. >> i found some forever stamps from a few years back, that was a good find. >> coming up, legendary

documentary filmmaker ken burns will join us here on post 9. he'll tell us about his new project and how netflix is making his projects more popular than ever. >> and ken burns will tell us where he's putting his money now. stay with us. "squawk on the street" will be back. ♪ ♪ so you can get out of your element.

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let's go to domonic chu here for a market plash. this one hurts. >> we're watching ssarepta

tanking. after the fda calls its drug application premature. >> big move. thank you, dom. straight ahead, a live interview with dan lowe. this is where you'll see him. the "new york times" deal book conference. he's expected to begin at any moment. when we come back, we'll bring his comments to you live. stay with us.

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welcome back to "squawk on the street." that's dan loeb backstage. a nice little look behind the scenes of what is truly an amazing conference. i don't know if you've seen the guest list, barry diller, senator carl levin, we're about to hear from dan loeb and later on a view from private equity, david reubenstein, david bonderman. the list goes on and on. >> and i think citadel's ken griffin, elon musk closing bell as well. >> elon musk 4:00 to 4:20, talking about tesla on a very busy week. no one can deliver the goods the

way sorkin can. here's andrew ross sorkin with third point's dan loeb. >> as many of you in this room know, dan has been in the news a lot lately and has made a lot of headlines in the world of activism, whether it be going after companies like sony or sotheby as or invariably the discussion goes to yahoo!. i want to start here, dan. activism, just the concept of activism. is activism a good thing for society, a bad thing for society? the reason i ask is there's invariably a question about the short-term nature of some activist efforts, not all and not all of yours, but when people look at some of the things that carl icahn has done, some of the things that bill ackman has done, you can name the list and you're part of that group, i don't know where you put yourself on that cohort.

do you think it ultimately makes companies better for the long run? >> when you talk about activism, you're really talking about shareholders and their ownership rights. you're also talking about capitalism and democracy. so as we see done in washington today, democracy isn't always perfect. in fact, it has a lot of flaws in it at times or expressions of it can be flawed and capitalism isn't a perfect system. even though they're not perfect, i think they're -- it's the cornerstone of what makes this country great and similarly to activism, there's good activism, there's bad activism, there's examples of activism gone awry. but i think by and large certainly in our experience we've brought a sense of accountability to companies that we've been involved in at a minimum. in certain cases we've actually changed -- completely changed

the trajectory of the business and affected an industry, the shareholders, the employees and everyone associated for the better. so i can't think of a time in our experience where we misstepped. i think there probably will be at some point in our life. but the good thing about activism is that there are a lot of checks and balances. so the activist has to -- the activist doesn't control the company. he has a stake of generally somewhere in the neighborhood of 5% to 10%. nowadays it can be less. but he does have the ideas and the ability to articulate those ideas and defend and debate them with the board. as we've seen in many of the instances that we've been involved in, this idea of winning and losing is sort of a binary way of thinking about it that i think makes for interesting headlines but isn't -- doesn't really go to the core of the benefit that activists bring. >> what do you think when you see, for example, bill ackman

and what happened with jcpenney? and how does that relate to the way -- that was a failure, an unmitigated failure. do you say that's just a messy part of democracy in the shareholder world? >> well, certainly a messy situation. and, you know, bill's had a lot of real successes in activism, general growth, canadian railways, there are a couple of others that he's done well on. but bill was one -- had a role in that, the board and the shareholders also had a role in bringing him in. >> you're being very nice to bill today. we'll get back to bill in a second because i want to talk about herbalife in a moment. but i want to talk sony first. you've been after sony quite a while now trying to pursue an effort to spin off some of their

entertainment arm, thus far unsuccessfully. where does it stand? what are you trying to do and what do you think you're going to accomplish? >> let's talk about success. so if you're thinking about success in terms of some kind of end point like forcing the sale of a company or of a division of a company or what we were actually arguing for was a partial spinoff of that company, we failed. but i don't look at our involvement in sony that way at all. in fact, i don't even think of us going against sony. in fact, i would think of our role model as much more one of -- much more like a private equity investor. we're not necessarily welcomed into the companies that we're involved in, but we have a role, it's express as a shareholder, not a director, but so far we've had a very good relationship

with sony. i've met twice with the ce o, been impressed both times, had breakfast with him in tokyo a few weeks ago with he and the c cfo. the reason we wanted the spinoff was we wanted greater focus on profitability and they've said they're going to do all of those things. they're having their first investor day on the 21st, breaking out all the financial statements of the company, reviewing their green lighting process. so i don't see that as being pushed back at all. i see that as a great outcome for us. >> how much of that bet of sony and it looks like it will be a successful bet for you, even if these other things don't happen financially, was a bet on japan?

>> we remain very bullish on japan. we wouldn't have made the sony investment if we didn't support abe and kuroda and everything that they're doing politically, economically and from a monetary standpoint. i wrote an editorial about the third era and we're very pleased about the direction. sony fit into that as a back drop and anything we dos have to make sense as a mac macro perspective because sony has been the beneficiary of a weaker yen and some sort of structural reform but also went to the core of what we look at in terms of special situations. he was a company trading in japan covered only by electronics analysts, valued on a multiple of book value that

had hiding in clear sight this incredibly valuable sony entertainment business, which wasn't being given credit. so i think at a minimum we've highlighted that value and it's been a benefit for the company. >> let me tell you what george clooney had to say about you and you know this already. he says "it makes me crazy, a guy from the hedge fund entity is the single least qualified person to make these kinds of judgments. that's like walmart saying let me fix your town, strangeling the stores, getting rid of the small shops and giving everybody that works for me no health insurance. >> it sounds a little hyperbolic. mr. clooney, if it's okay if i

refer to him as george. i'd like to meet with him at some point and talk this out. i think we agree more than we disagree about the company. i think he misinterpreted us and what we were trying to accomplish. as i said to "variety," i think we both want the same thing, less money spent on overhead, more money spent on making movies, but i respect his passion to the company and his loyalty to his friends. >> let me ask you about another thing that's in the press. i don't know if it's the elephant in the room but many here may have read a piece in "vanity fair" that was relatively critical of you in the past couple of weeks. furst, have you read this piece? >> i haven't read it. >> i don't believe you. really, you haven't read the piece? >> there have been a few snippets that people have sent me in e-mails but i haven't had time to read it. >> let me tell you some of the things that's in it. i want to focus on the

substantive stuff, which is this. in this piece they can go back and look at your relationship with bill ackman, that's why i was suggesting you were being nice to him today over your investment in herbalife. one of the contentions of the piece is that you bought herbalife -- this idea that you bought into this company, you put out a letter, which was then of course public saying that you had a price target on where this company was going to go. people thought you would be in the stock for some lengthy or at least some longer period of time and then several weeks later you dumped out of that stock. >> mm-hmm. >> the contention in this piece is that that is the equivalent of pumping and dumping a stock. what do you say about that? >> wow. quite an accusation. let's be clear about a couple

things. first of all, i have a fiduciary duty to earn a rate of return for my investors. so my fiduciary duty is to my investors, not bill ackman. secondly, an opportunity was created whereby we thought that the selloff in herbalife was overdone. i spent my christmas vacation last year analyzing and studying the company, on calls with lawyers, doing all kinds of due diligence and research. i even flew up from mexico where we were to meet with the ceo of the company. it was my assessment, along with my analyst team, that the accusations were, in our opinion, unfounded. >> and the accusation on bill ackman's side being this was a ponzi scheme -- a pyramid scheme rather and it's going to go to

zero. >> and bill did a lot of work and i'm sure he believes in his heart of hearts this is the case. we had a different opinion about the stock. this was not a public letter. we wrote a letter to our investors as we often do about our recent investments. we thought this was an interesting one. we started acquiring share around 28. we said in our letter that we had a price target of 55 to 70. by the way, the stock today is around 62, $63, so right in the sweet spot of our target. there was nothing disingenuous of our target. one this evening people don't understand, when you say you have a price target, number one, there's no duty to hold that stock until it reaches that price target and typically for us our price targets are about a year out. so when we bought a stock at 28 and within six or seven weeks

got close to the price target hit 44, that to us was a gift. we decided to take the money and run. there was no pump and dump. i think there's an undue sense of power that we as hedge fund managers. i didn't divine the price of the stock, i can't make it go up. on the tail of what we did, much smarter and more reputable investor carl icahn has taken a stake. it's hardly a market game we were trying to play. >> before you go public with a letter that is intended for investors but invariably goes public, this is true of all activists, that simply by going public, you were able to move the stock and the responsibility

that goes with that. >> i'm sorry, was there a question with that? >> the question is how you think about that issue. >> here's how i think about the issue. i think it's really important that in investing, whether it's dan loeb or david einhorn or big ackman or which ever smart, talented investors makes a proclamation about a stock that they're in, that whoever it is that invests has a duty to come up with their own conclusion. and i would encourage anyone reading one of my letters, or anyone else's for that matter, not to make any kind of snap judgments or think they can ride the coattails and trade around it. sometimes these things work, the case of yahoo! somebody who bought. but there's no telling -- unless we have a 13-d filing there,'s no duty for us to report when we decide to get out of a position.

>> can you walk us through the process, just the investment process, when you decide, ah, i discovered this company and i think x, how do you find the company? how do you decide this one i'm going after, this one i'm not going after and this is how i'm going to do it. maybe we put this in the context of sotheby's, if you like because that's in the news or another one. >> i could spend a lot time talking about this. in brief we have a pretty expansive investment framework. we have a philosophy that we employ, we have framework, we have characteristics of investments that we look for that fit within that framework. this framework, and this a framework that works for us and is not going to work for efr one, we invest in equities, we primarily focus on special situations, things like

spinoffs, demutualizations, post-war equities. it's kind of how we got started. it's evolved to where there's operational complexity and change. it's a little more vague. if you think about those type of transactions, those are the things that fit our -- those are the things that sit in our sweet spot. and companies with hidden value and that are misunderstood have a special place in our heart or my heart. yahoo! was a good example of that. when we bought that, it was trading below the value of the core business, if you assign a conservative value for alibaba and yahoo! japan. in the case of sotheby's, it was a little bit of a reach for us in terms of the framework that we work within. in the case of saturdayby's, there is some hidden value.

there's a lot value in assets on the balance sheet, there's real estate in the u.k. and in new york. there's the receiver abables of million on the balance sheet that should be monetized. that was part of the thesis. the other part was this was one of the remarkable global luxury brands and. we saw greater potential of how that brand was being monetized and how the company could be run. >> when you go after a ceo or a board and you decided, i'm going through the front door, i'm going through the back door, i'm going through the tent, i'm going under the tent, walk us through that. you give us some clever,

marvelous reading. walk us through the process of deciding that guy, i'm getting out thereof. >> well, typically what happens is -- you're seeing the, you know, the tip of the iceberg here. you see the stuff that goes public. for the most part we carry on discussions all the time with management teams and there has to be, you know, some period -- there's generally a period of explaining to them what our intentions are and what our normal practices are. i was down in memphis last week and met with fred smith, who is one of the great american -- >> federal express. >> ceos, entrepreneurs, company founders. i didn't have to explain to him because he knows how great he is but we had a very constructive discussion about the company and we had some ideas, we share them. i think he disabused us of some of our notions and life goes on. >> are you an owner in fedex? >> we are. >> and you look the stock? >> i do.

>> and you like fred? >> i like fred. >> so you're not going to be trying to oust him? >> i'm not. there are other companies we got involved in. i think we had other constructive dialogues, folks, c.f. industries. we like the business, we think that they could better optimize their capital structure, pay a better dividend and they've done that. this isn't a bullying thing. this isn't like us versus them. it's like, hey, guys, we're owners, you're owner, you're management, have you thought about it this way. >> do you like when it gets very nasty? >> absolutely not. it's a distraction and a waste of time. >> you did a nice job of shutting me down there. let me go two other things. one on herbalife. this goes to the issue of whether you like a good fight. how personal is it for you? people think of it as a personal

issue, you and bill and the back story and all that. >> it's not personal at all. i haven't owned herbalife, i can't remember when we sold our position -- >> you didn't take any great joy in the personal piece of it. people were seeing comments you were making on bloomberg terminal and other things. >> that's silly banter that might come as a shock to you but hedge fund managers do engage in silly banter with each other from time to time. >> let me ask you about yahoo!. you're no longer on the board of the company. >> no. >> so you can speak freely if you couldn't be. when you made the investment, you said you did so because you thought there were more underlying value. at the time i can't imagine you thought you would get marissa meyer to come. when you bought into it, there was roomors the whole company was going to be get broken up. how much of the investment thesis was about changing out management and how much was the situation that moved into you

becoming a meaningful board member as opposed to sort of a passive investor waiting for it to pay off? >> i think this cuts to the core of one of the basic ways that we operate that's different, say, from a private equity firm. in the case of yahoo! we could never have dreamed that we would be able to get a ceo -- that weed first of all be able to get on the board and then get someone like marissa meyer -- get marissa meyer on to the board. it's funny, when i first got on, i met jack dorsey. i knew him a little bit. hand he maybe half jokingly said you should try to get marissa meyer to run the company and sure enough we were able to do that. but one of the things that we had the flexibility to do as a hedge fund and not a private equity firm is to recognize there's a lot of value and we'll figure out down the road how we get that value. so i didn't have a specific game

plan, but it obviously worked out pretty well. >> you still a fan of yahoo!? why'd you step off? >> again, yahoo! had reached -- gotten very close to the price target that we had had, well over 100% return, 53% i.r. since the time we made the investment. >> happy with all the strategy? david carb is coming out later from tumbler. >> terrific. >> were you a fan of that? does that make sense to you? >> it was a unanimous decision by the board to support march a -- marissa in making that connection. it's an important step for yahoo! to take to make the connection with the older demographic. >> you've been a huge supporter of charter schools and very outspoken about charter schools and you put your money where

your mouth is when it comes to charter school. having said that, you've been put on a list by randi winegarten, who is not so happy with you and she's suggested that public pension funds should not be investing in third point as a result. square that circle. how do you think about both of those issues and would you be so inclined making one political view knowing it was going to hurt your business on the other side? >> well, first of all, it hasn't hurt my business in any way. on two levels. first, none of our investors -- well, our investors disconnect politics from investing. they have their duty, which is to earn a good rate of return for their investors. fortunately to date we've helped them do that. so they're more focused on meeting the needs of their pensioners, not some sort of political agenda. i think it's just really unfortunate. i care a lot about -- let's talk

about principles. i put principles before making money and -- >> principles as in your own principle, not principals of schools. >> principle, not principal. i remember that difference in spelling. >> thank you. >> so, yeah, so i'm very committed in terms of the foundational issue, individual rights and freedom. i was a big supporter of gay marriage. continue to be. not only gay marriage here in the states but gay rights globally. i'm very committed to the rights of all kids, regardless of race or zip code to get a good education, and i'll continue to advocate for that. >> okay. final final thing. you had a near -- not near

collapse but your firm was doing great and then into the crisis you went. >> mm-hmm. >> i remember seeing you i think in the late 2008/2009 and it was tough. it was particularly tough, i th, for you. what if -- you made a game-time audible decision, i want to say about march or april of 2009 -- >> early april. >> early april. to go back into the market full on when not a lot of people were making that call. how did you get there? just walk us through that -- because that's -- i would gamble and argue that that decision is what's put you here and given you all of the opportunities it's, more than anything else that's happened in the past couple of years. >> there's two things that has me sitting here. there's that decision. >> besides your pen, the wonderful pen. >> no, it's not really the pen. putting the distraction about activism, good, bad, whatever,

aside. i like to think that we're basically research analysts and investment geeks. i fill out forms, what's your profession? i say, research analyst, because that's really what we do, not activist. david tepper, who's one of the great investors -- probably the great investor today -- talks about this concept of trading windows. so at any given time, there's something that's really important, and i think the market generally can focus on pretty much one thing at a time. right now, we're pretty bulli bullish -- central bankers around the world are easing and prepared to inflate assets. so this trading window we're looking for -- i don't know if the stocks will soar, but they probably won't go down with the fed posture. if you go back to april of that year, the one thing that really mattered -- the thing that really you needed to focus on in that trading window want the

pandemonium around you, the depression, the gloom-and-doomers. it was really, like, what's going to happen with the stress tests? that seems sort of subtle, but the fears of the market were all predicated on a financial collapse of the system and of banks -- people going to their atm -- like, real fears. i had a good friend, hedge fund manager, i won't tell you which one, who took $50,000 out, because he was concerned that there wouldn't be cash in the atms. i think a lot of people felt that way. so we spent a lot of time studying what was the treasury's game plan with respect to the stress test? and what the doom-and-gloomers believed -- and they were right -- was that the entire financial system wasn't solvent, and we're teetering on this horrible collapse. what they missed, though, was a really important issue, which is time. so there's a difference between

liquidity and insolvency. and every bank, given enough time, we believed, could dig themselves out of this hole, could earn their way out, could sell assets to get their way out, to convert preferred stock into equity to get out. and once i had that insight, i was -- i was, like -- i felt -- i was giddy. literally, i wrote in my letter, "a kid in a candy shop," too many cheap securities, that if the world didn't come to an end, would do well. i think we rode that through for a couple of years. and the other thing which you didn't mention, which helped us get here, and this goes back to this idea of principles, was we didn't -- we didn't get -- we let our investors out, we liquidated what we had to. to your point, our assets dropped from $6 billion to $1.4 billion, and in another $500 million in redemptions scheduled in june of '09. and i called every one of those

people, and we actually went from annual terms to quarterly, because i wanted people -- i wanted to be able to tell everyone, listen, this is a good time to be an investor. if you want to take your money out, do it in september. let me show you this september. >> right. >> and it worked out okay. >> it has worked out okay. dan loeb, does this very infrequently. we really appreciate the conversation. thank you. [ applause ] >> and that is dan loeb of third point with our andrew ross sorkin at the deal book conference, starting out with kind words with bill ackman, saying his relationship with sony is good, he'd like to meet george clooney, but maybe the news of the interview, i guys, might be the comments on fedex, it's a long position. he has met with frederick smith of fedex, but the stock up 2% intraday on the comments. >> i've been hearing fedex in

the chatter, the activist community, some question as to whether there might be -- you know, it's funny, if you recall when we didn't know who ackman was coming after -- fedex was one of the names that rose when we finally found out, or we told you it was the products -- that name continues to be around. there's some that look at their strategies in terms of how they pay for their plane, lease them. it's interesting he's poked around there. he has a position, but doesn't have any, apparently, wish to be a -- >> and mccowan is up 44%. >> yeah, and valuation. it's not because they're concerned -- it would suggest the shares are overvalued relative to how the business is underperforming and perhaps more value to unlock. >> of all of the areas in which he stirred the pot, talking about marissa mayer, what was interesting to you? >> dan didn't really bite on much, i think we'd say.

frankly, i don't know we heard a lot that would help our investment opinion or understanding of a particular situation. sony clearly is going to keep going. will he in some way get them at some point to consider doing a subsidiary ipo of the entertainment business, as he wants them to? we shall see. hlf, didn't go after ackman. it was the diplomatic dan loeb today, no doubt about that, i think. backing away from any controversy, even on sotheby's, and even when you read his -- he excoriates them. you're an able caretaker but you haven't shown the innovation and inspiration they need today. >> on a day when they're up almost 4% because of the earnings report last night, which was strong. a little bit of a disconnect there that he didn't address. >> yeah. but dan is very capable at raising money, allocating it well, and being the diplomat when required in front of audiences.

>> the diplomatic dan loeb, as you put it. all right. moving on now. mexico is sizzling hot when it comes to auto making manufacturing, and they are in the midst of a $10 billion expansion that will have major implications across the industry. phil lebeau is in mexico with carlos goen. phil, over to you. >> reporter: thank you, kelly. we have a busy day in new york, and also a busy day here in mexico. and carlos is joining me, chairman of nissan-renault. a lot of the plant here, why now? >> yes, we're already here. >> correct. >> we have a plant that's full. 175,000 cars a year capacity, capable of doing four cars. but it will be filled with one car, the central behind me, demand is strong in the united states, and very strong, also, in mexico. little by little, mexico is becoming an export hub for the americas. >> the weaker yen.

obviously, you're more diversified than many of the japanese counterparts around the world. how much has it benefited you? does it make it a little -- put less pressure on you to diversify the base even more? >> no, i said when the end was 75 or 76, we need to hit 100 in order to -- for the end to be neutral. we're there. i think it's neutral for the moment. i don't think there's an advantage. i don't think there is a handicap. we are much more diversified than our competitors in japan. we feel good about it. frankly, nobody can predict where this is going to go. so we're happy with the yen at 100 now. >> you recently -- i shouldn't say recently -- in recent years, you have said the goal was 1.5 million electric vehicles for nissan by 2016. you're dialing that back now by almost 1 million vehicles. were you too ambitious, too optimistic about the take in the market? >> you know, you have to divide it in different steps. first of all, the car, the technology -- the car and the

technology is at the top level of the expectation we had. all of the people that build the electric car, particularly the leaf, are happy with the car. we have the infrastructure being built, particularly in countries that have decided to have an incentive for consumers. and this is what's blocking us today. but i still maintain the 1.5 million, except i have to recognize because of the lack of infrastructure, it's not going as fast, or just postponing it a few years until we have the appropriate infrastructure. this is a problem worldwide, but every time we see in japan, in the united states, in france, the infrastructure is being built in a specific city or in a specific state, the sales really take off. >> the lower gas prices we're seeing in the u.s. and other countries in the world, is that holding down demand? do you look at this and say, gas will go up and come down, but the demand will be there. >> i think the trend for oil and gas, no matter what, is going to go up. it can from time to time, you know, adjust a little bit, or

consolidate. but i'm not worried about this. but there is another consideration to be taken -- to be taken is the co2 emission and the global warming. this one, it's not going down, but coming up, and is alarming in some countries. that's what's triggering, for example, the chinese, pushing the electric car. >> carlos goesn, joining us on a huge day. opening this plant capacity, 175,000 feet, and most will be the sentra. back to you. >> all right, thank you very much, phil. we want to draw your attention to lcc, low-cost carrier, ticker for u.s. airways group, it's now halted with news pending. obviously, investors who watched the airline space have been on tinderhook, watching u.s. airways and amr, because of what some would suggest would be a settlement with the justice department. for the time being, we know u.s. airways is halted, 24.10, i think was the last print. if we get any headlines on that, we'll bring them to you.

if you're just joining us, here's what you missed earlier on. >> announcer: welcome to "squawk on the street." here's what's happened so far. >> who is the ben bernanke of bit coin? >> it's the creator that we don't know. >> you don't know him? >> nobody -- you don't need to know him, because it's based on cryptographic and not a trust in individual. >> twitter is a good investment for those people who got in early wholesale. people who pay -- by the way, the only people -- nobody's investing in twitter. nobody does invest in these companies at this stage of their lives. they're looking to score. >> it doesn't matter what i think. horton has a move. this is my chance. horton. horton who? >> i don't know, man, complacen complacency. complacency. >> i hate to use that term, people have been complacent for a while. >> yeah, it works until it

doesn't. [ opening bell ] >> opening bell here at the exchange. >> enormously impressed with the s.e.c. the staff is absolutely tremendous, works very hard. lots of expertise. you know, what i tried to do was they have massive responsibilities to do. i really tried to make this as efficient as we could be. >> this idea of winning and losing is sort of a binary way of thinking about it that i think makes for interesting headlines, but isn't -- doesn't really go to the core of the benefit that activists bring. ♪ good tuesday morning, live at post 9 of the new york stock exchange. let's get a check on the markets. the markets once again, the second day in a row where the intraday range has been soft. down about 28 points herement the s&p is down 3.5 to 1,768. a lot of fedspeak, and shares of d.r. horton are rallying. the fourth quarter revenue came in above estimate, 19% increase

in sales year over year, and shares of dish network after earnings beat. dish only added 35,000 new subscribers compared to 135 at rival directv. hedge fund billionaire dan loeb speaking out at "the new york times" conference. we'll tell you what he had to say. plus, virgin airlines posting a high result. david cush will tell us where the company goes from here later this hour. plus, ken burns' legendary names, how is the rise of netflix affecting his career? we'll ask him about that and the latest film in a few minutes. how's this for a resume? father of the ipod, senior vp of apple, author of 300 patents, and now ceo of a home-automation company. yes, tony will be here to tell us how he's making your home smarter and less annoying. first, we're watching shares

of u.s. airways group. david is holding a phone, not sure if he wants to answer it or go on tv. >> holding the phone. let's quickly talk here. i will call you right back. you know, we have -- obviously, we have a halt here, and in u.s. airways, amr is bankrupt, if you recall. but there's going to be equity -- potential equity recover value for those in the equity value of amr. we can anticipate here and perhaps speculate this would be in potential of a settlement between the department of justice and the two carriers, which we're only a couple of weeks away from them closing their deal before it was challenged by the doj, in a surprisingly broad, frankly, complaint against it. the trial for which was scheduled, or is still scheduled to take place at the end of this month. however, the two sides had been talking, we know that. i've reported that. others have, as well. there's been a mediator put in play, and they were talking about a deal under which they would give up a good deal and

reagan international airport, a very large concentration of gates for the two carriers, and a number of other spots. so all we can do at this point is assume perhaps this is -- the halt is related to some sort of potential settlement there between the government and these two companies, and going in, we knew it might not be the easiest of cases for the u.s. government. many said it was kind of a mixed bag, hard to -- hard to handicap how it would go, not the typical antitrust case where you kind of wonder whether just how badly the government is going to be, whoever it is up against. >> it's a sharp contrast from when the case was first discussed, some assistant attorneys general who said, quote, the fact of the matter is the consumers will get the shaft of any merger. and so, there's a lot of discussion as to whether the justice blinked, they lost their fight, and whether this is what we're looking at. >> mayors in dallas, phoenix, charlotte, miami, philadelphia, chicago in recent weeks had

co-authored a letter urging the merger to go forward, saying that their communities would benefit. so the consumer harm that you're talking about clearly not a concern for some of the mayors who are directly, you know, concerned about the business -- >> the company has done an effective job in turning the opposition in those very states in its favor over the last couple of months. that could have been something -- or could be something that's helped it in its negotiations. again, we've got to wait and see whether, in fact, this is the news we're speculating on at this point. and what a settlement will look like. certainly good news, though, for u.s. air shares if, in fact, that's the case, and for american airlines, which, again, remember, is using this to emerge from bankruptcy, but will own over 70% of the combined company. i have to go back and look at my notes. >> the shares are moving up, up better than 8%, still trading right now. ray, the founder of bridgewater associates, making an appearance at "the new york times" dealbook conference earlier. kate kelly is on the ground there. joining us now with some of the highlights. good morning, kate.

>> good morning, kelly. how are you? just a quick mention, i want to make, of dan loeb who just came off the stage moments ago. he said he likes fedex and we're seeing intraday highs based on that commentary. he also said he had recently gotten together with ceo fred smith. so kind of an interesting surprise disclosure there. but back to ray dalio, some fascinating thoughts from the equities market and the market overall, what the fed is likely to do. he said for the next 10 years or so, he expects equities to have 4% returns. he thinks it will be tough for the fed to raise interest rates in this environment. and he also said, for individual investors in particularly, it will be a rough road. let's take a listen. >> i think that going forward, most investors are not going to be able to produce alpha. alpha's a zero sum. you know, we have 1,500 people who work there with computers, doing all sorts of work. and it's the pros against that. so that alpha is a very

difficult game. i would say most investors should create a balanced portfolio against that. but it's a difficult situation. >> balanced portfolio, of course, meaning, you know, the proper mix of bonds, stocks, other assets, how to get that right. dalio, also, is a famous backer of the risk-parity strategy in which you look at the economy and your portfolio and sort of four different quadrants based on interest rates and other factors. his fund, the all weather fund, has successfully invested with this risk parity model for a number of year, although they had a tough time earlier this year, which has caused concern among pensions funds, so interesting thoughts from dalio on the challenge to the institutional investor to what the central bank can or needs to do in this environment. >> kate, it was the performance of that all weather fund after the inflation expectations collapsed earlier this year that really raised some eyebrows, because this was supposed to be billed at the can't-lose strategy. did he say anything specifically

about that? >> so there was a question from the audience, kelly, a little bit about risk parity. they didn't mention all weather that i heard. he responded and he talked a little bit about what was happening in the bond market. one person i talked to who's been at the conference today said a key figure here is the bond volatility expectations versus stock market expectation, and when you have that out of whack, you run into trouble. >> we're seeing more of that rearing its head, so we'll keep an eye on that. kate kelly at the dealbook conference. thanks. >> as kate just mentioned, we heard from third point's dan loeb, talking on everything from marissa mayer to his involvement in sony. we want to take a listen to a little bit of that. >> let's talk about success. so if you're thinking about success in terms of some kind of end point, like forcing the sale of a company or the division of a company or what we were actually arguing for was a partial spinoff of that company, we failed.

but i don't look at our involvement in sony that way at all. >> jon fortt joins us at post 9 with insight on his comments, not just individual names, jon, but the roadmap he was willing to give us about how activists operate, or at least how he operates. >> yeah, these guys are very smart and very smooth. i mean, let's face it. he spun that. he didn't get what he wanted out of sony. but he did test a new ceo in horai to see how he could push him. we had him on after that whole thing blew up, and i was talking to him, as were some others here, how he plans to navigate that. he used some good diplomacy. we see tim cook taking a similar approach right now with carl icahn, which we've been talking about. it'll be interesting to see what third point -- what loeb does with timco software, recently increasing a stake in that company that does data-center work, but the stock hasn't been doing that great. not clear what his intentions are.

a lot of testing of new ceos and, of course, tech ceos whose stocks haven't been performing that great. >> i love the aside he made about how jack dorsey had suggested the idea of putting marissa mayer at yahoo! and look at the company today. >> a good idea. >> probably not an offhand suggestion, but her tenure there, if you look at the company's performance, has certainly been one of the better outcomes with regard to the different ways he's looked around that area for investments. >> it's really interesting the power of personality that clearly these activist investors know how to use and some of the better ceos know how to use, also. marissa mayer has been good about controlling her image and getting investors on her side. coz horai did that, as well. they see it going from the short-term thinking to the investors trying to get a return. >> you could argue as well they benefit from alli baba, and eve sony benefits from what's happening in japan, so to what

extent is the ceo protecting that image in. >> exactly. they have to play the hand they're dealt. sony has been hurt by the yen. it's turning around, kind of an opportune time. we'll see if they can get the tv business turned around. that's a tough business, and it's the core of sony's troubles. >> yeah. interesting discussion with loeb. jon, we'll see you in a few minutes. i think we're going to david with more on u.s. airways and amr. >> we can confirm now what has been reported by another news organization, and what we were speculating on based on the halt in u.s. air stock price, that u.s. air, american airlines, the department of justice, and states as well, that were opposed to the merger of amr and u.s. air, have reached a settlement that will allow for the deal to go ahead. we expect to see a statement in the not too distant future from the doj and the states, outlining, as well, what the remedies are for them, allowing

the deal to proceed. it's not believed, sources near the situation tell me, there will be a behavioral remedy, but you will expect to see givebacks, particularly at reagan national, which we talked about, a great concentration that they had in terms of slots, and a number of other airports around the country where the two getting together also might have created less competition than was desired by the government. but it certainly is an important milestone here. by the way, showing you u.s. air. there'd been a lot of concern about that. remember, they've been looking for a merger partner for years. united. delta. whomever they could potentially find, they had tried. finally, they get aggressive on amr, and debt holders of amr will own 70% of the combined equity of this company, but what's fascinating here, as well, from a bankruptcy perspective, having covered so many through the years, the recovery value on american airlines' stock price is extraordinary. this was trading at 25 cents.

and now, you can see, i think we've shown it to you, that's the bankrupt equity, i believe we've been showing you. it is up sharply. there is going to be that value as a result of this deal. satisfying creditors who obviously, again, will own equity in the combined company, as i said, equal to roughly 70%, and sending them on their way to a deal they were only a couple weeks away from when they got blindsided by this suit from the doj. >> any idea -- i mean, continental/united. delta/northwest. any sense of why this got a little more -- a lot more scrutiny than the others? >> the last one. >> the last one? >> yeah, i think that's sort of the key that kind of woke up and said, "wait a second." >> yeah. >> it's funny, in speaking to people around this deal, there had been conversations last summer that with the regulators, but they truly didn't think they would see that kind of response from the doj. nothing had led them to believe they were coming, except there was silence in the weeks just prior to their expected close, which was much earlier this

year. that being said, a trial scheduled for, i believe, november 25th. a mediator stepped in. we know there had been negotiation settlements that occurred. doj made proposals, responses, and it appears, as i said, we have reached a deal. we should hear the details in the not too distant future. >> rivals loving it, as well. jetblue up, so no surprise. >> again, halted at 24.10. let's get to dom chiinic ch with a quick "market flash." >> fedex moving higher after loeb said his company has a long in the company. he met with the ceo and he doesn't want to see him replaced. so positive comments from a activist investor and dan loeb to fedex. back to you, carl. >> thank you very much. when you think of histories and documentations, the documentary begins and ends with

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not much movement on the indexes today. on the equity side, it's the bond space where a lot of the headlines are. no surprise it's having a knock-on effect on the utility sector, one of the weakest this morning. let's get out to dominic chu with more. >> it's a tough day for utilities. leading down is nrg energy. the utility is buying edison international's mission energy unit for around $2.6 billion in cash and stock, but it lowered the earnings guidance for the year, so that's why nrg is helping to lead things lower. also, pg&e, excelon and domin n dominion, one of the big reasons you see the utilities as the laggards today. >> thank you so much, dom. one thing that's not a laggard is the airline sector potentially in a few moment, if and when we get the halt lifted off of u.s. air. still halted at $24.07, i guess was the last print. we are expecting some sort of

resolution to the lawsuit from doj regarding their merger with amr. as our david favor is reporting. as soon as it opens, or when we get an announcement from the company, we'll bring that to you. filmmaker ken burns might be the biggest name in the documentary world, and even the ken burns effect available on most editing software, and now, his films are more widely available. his latest piece is "the address," encouraging people to learn the "gettysburg address" in honor of its 150-year anniversary. ken burns joins us. >> it's my pleasure. thank you for having me. >> airs in april, right? >> yeah, a little film on the dyslexic kids at a small school in vermont who are -- they come home from thanksgiving break are asked to memorize the "gettysburg address" and publicly recite it around lincoln's birthday. they do.

it's so heroic what they go through. it's a boarding school for young boys. and we thought, why not challenge the whole country, the whole country, to memorize and learn or read "the gettysburg address," and it's on learntheaddress.org. it's so good for a country that's so fractured to come together. >> i keep going back to the book. what is it about the couple hundred words? >> two minutes of the greatest oratory. doubling down on the declaration of independence. look, we really did mean what we say four score and seven more. it's the greatest american battle. you have this tremendous loss, but also the sense of tremendous opportunity, and in two words, lincoln was able to distill what our whole mission was and what the mission had been from now on. and we're still living under the marching orders, and that's the great thing. the fact it can inspirit people from the left, from the right,

from the center, and when we send out a feeler, will you help us challenge people, we got all of the living presidents, including the sitting president, bill o'reilly and rachel maddow, and all after sudden, we couldn't mash them all up in one. we've got to go several, all in support of the boys, you know, who struggle with these learning difficulties for months to do it, and they do it so heroically, that we don't do anything in unison anymore. what if we did this? it's not a kumbaya moment. 80% of college students couldn't tell you of, where, for, by the people should not perish from this earth. that means you have a degree in hand, and you don't know where it's from. >> i wonder, by the way, you have people coming to you all the time pitching their ideas. and now there's more opportunity than ever to get it out there. and just going back to the netflix point, how is that changing for you the kinds of

projects you're able to take on, the kind of work we may see from you in the future? >> well, i've tried to keep doing the work i've wanted to do, to do the best sort of thing. what we've not stayed still at are all of the platforms that we now have. it used to be appointment television on pbs. it still is for a whole big sector. but for a lot of people, they want to watch it when they want to watch it, and that's where netflix comes along, on-demand, download to own or rent, and all of the things have added enormously to our audience, and wire underwritten by bank of america, and they see this not only in history, but reaching broad numbers of customers who are potential customers. >> you still shoot on film primarily. >> yes. >> as we look at what's offered on netflix on the screen, is netflix number one in your distribution roadmap, or will it always be public television or dvd? >> it will always be public television to that point when the audience is greater else yr.

you have to remember public television is like the tortoise as opposed to the hare, apparently sleeker, sexier things. but we cross the finish line with huge ratings, two, three, four times the normal rating, blowing out hbo and showtime, and we can accumulate the "civil war" 23 years ago, and the thing on world war ii got 37 million, and that was "civil war" 15 channels, then 500 channels and still drawing the same kind of great number of people who want to get grandma, get the kids, sit in front of the tv. now, we know we've got other venues that you can get it still on the old forum of dvd. but you can also get it on netflix and all other platforms, and that's hugely important, and we go into schools all the time, and today's a schoolday in america. the civil war, 23 years old, is being watched 2,500 times today. >> absolutely. >> somewhere in america. and that's legs.

and that's why i've stuck with pbs. >> i think we can all understand that. ken, we can't wait for april, and the address -- >> i'm coming back, so you -- coming on april 15th. i want to come back and hear you guys -- >> we're going to recite it. >> -- upload it to learntheaddress.org. >> ken burns, thank you for joining us on "squawk on the street." you heard the news, amr and united settling the case with the department of justice. we'll talk to david cush who has opposed the deal, first, rick, what are you keeping an eye on today? >> well, today, i think i'm going to keep this eye on a former fed official. and this eye on a former president. because what they're doing, both of them, they're speaking out. and i guess the topic would be speaking out better late than never with a guest i know pretty well, who sees things the way i do -- me. all at the bottom of the hour. welcome back. how is everything?

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welcome back to "squawk on the street." the "santelli exchange" today, i want to start on something that the floor is really buzzing about, actually. i've been handed a quote, several quotes, by a number of traders, because a daily digital magazine called "ozy," i'm not familiar with it, but they have a quote from former president bill clinton. i'd like to throw it up on the screen while i read it. if you like what you've got, you can keep it. this is a promise young people heard clearly, and it's one president obama needs to keep. even if it requires a change in the law. listen, i think what's going on with obama care, of course, is big. i think this is big. with respect to president clinton and his history in health care. but i think it's even bigger when you think about the context of this could be a first salvo among many as the former president, of course, happens to

be married to who will likely be a prominent candidate for the democratic run for the presidency in the form of hillary clinton. i'm personally very interested to see what joe biden does. those will be a couple of debates i'd like to see. now, let's switch gears a bit to the marketplace. by the way, he is speaking out. wish he'd spoke out a bit sooner. 2.77 on a 10-year, the highest yield level since about mid-september. as the market continues to flex its muscles, especially after what was deem add very decent, in certain way, jobs report, although there were a lot of asterisks. let's go to another speaking out that is very similar, and it's on the context of treasuries. it's a former fed official, worked for the fed for about seven or eight years, then came back to run the mortgage purchase program. name is andrew azeer, and he wrote in an op-ed, "the central bank continues to speak for helping main street, but i've

come to recognize the program for what it really is. the greatest backdoor wall street bailout of all time." another person speaking out. of course, it's kind of after the horse has left the barn. but something he said in there really hit me hard. he basically said .2% of biggest banks control more than 70% of all banking assets, and he doesn't believe main street's being helped. so once again, whether it's health care or quantitative easing, it seems the public seems to be the last to know the truth. back to you, kelly. >> all right. thank you, rick. we should mention, as well, that andrew will be on "fast money" after the close today for more, who want to explore his comments in "the journal" this morning. do you remember this thing? it may look a little old-fashioned now. but that is the original ipod. and our next guest is one of the fathers of that device. now, he's working at a new company, and it's trying to make your home a little safer without being annoying. we'll explain how and what he's up to when we come back.

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you can see the u.s. air has been halted. here's the crowd, waiting for u.s. air to open. no indication of when that will happen. the exchange official also come down and give everybody the word. we don't have a time on it right now. look at many so of the airlines again. u.s. air is not trading right now. united has been trading up. jetblue has been trading up, as well, throughout the morning. let's talk a little bit about d.r. horton. horton, the first-time homebuilder company had a lot of numbers out this morning. they made the earnings numbers, but weak on orders. orders were down 2% year-over-year, and that was a concern. cancellation rate 31%, much higher than expected. they're avoiding cutting the prices. that's what saves them. a lot of people probably walked away, they didn't cut the prices. the cancellation rate was higher. they're not increasing incentives, so they're trying to hold onto the prices and the margins. you can see, put up the stock

price, the stocks are up even though the cancellation rates were higher than expected and their order rate was a little bit lower than expected. all of it generally good news, being able to hold the price, but disappointment because people were able to walk away. finally, the ceo of real estate company remax was here this morning, ringing the opening bell. i talked with her. she says home prices are now stabilizes, and she says that is a good thing. >> we've had low inventory and high demand. so prices are going up. what we're seeing now is inventories beginning to grow again, prices will stabilize. if prices go down a little bit, that's a good thing. we don't want them going straight up. >> and re/max went public again, the beginning of october, $22 the initial price, it started at $26 and change. you can say it had a nice little ride up to about $30, and now sort of ridden back down. it's still above that initial offering price of $22.

guys, back to you. we are waiting. u.s. air. still waiting for it to open. >> indeed. thank you very much, bob. of course, if you are just joining us, we're waiting on news that we believe the justice department and amr and u.s. airways have reached a settlement over the lawsuit, and it would create, in effect, the world's largest airline. we're looking for terms of the settlement, potential settlement, probably divestit e divestitures at key airports, reagan national gets talked about a lot, and potentially dow jones, commitments to maintain service at small cities. when the announcement happen, we'll see if it is opened for trade once again. safety shouldn't be annoying, and that's what our next guest thinks. nest is a home automation company that seeks to reinvent the smoke alarm and the thermostat. tony fadell is the father of the ipod. >> and thank you, tony, for joining us.

the nest protect smoke alarm, kind of more than a smoke alarm, it should be shipping soon. tell me, how's that going? and compare this stage with nest to the ipod? because i see some similarities, right? you had -- you had the p.c. and the post-p.c. era, and now you have the smartphone, and maybe post-smartphone era. >> sure, jon, it's great to be here. what we're trying to do is reinvent unloved product, products that you use every day -- or you may ignore every day -- and try to bring them into a modern era. you know, these products have been around since the 70s and 80s, and they haven't changed. the tvs, phones, everything has changed. if you look at -- taking that back to where the ipod or the iphone, the ipod was really just a cd player that could play more songs wherever you went. the cd players were kind of, you know, commodityized at that point. and when you look at the iphone, kind of the midmarket phones

were commodityized phones. and no one thought they could break out. if you look at what we're doing there with the smoke alarms and with thermostats, we're trying to do much of the same thing -- reinvent unloved products. >> how many $130 smoke detector disyou se s can you sell? is this like the apple-fied home products thing, where you'll mark them up five times -- you've got some extra capabilities here. maybe you actually do end up providing better value. but how do you communicate that? how do you make the case that you're not just selling some san francisco, northern california jewelry. >> sure. sure, absolutely. and the same thing was said of the ipod and the iphone, right? and, also of the thermostat. if you look at just the business. in the u.s. alone, 750,000 smoke alarms installed in residences and commercials, that's 40 million to 45 million sold annually.

if we can have a small chunk, that's great. the differentiators. today, the government mandates you have to put smoke alarms and c.o. alarms in your homes in most states. so people have to buy them. today, they can spend $60, $70 on a product that just beeps at you. it beeps when you're sleeping. it beeps when you're cooking or maybe when you're taking a shower. it doesn't do anything but beep, and you have to put it in. so what happens if you actually have a choice? a product that you can actually give you information, not just beeps and doesn't wake you up in the middle of the night? i think you might pay for that. >> you want to go public some day? >> maybe one day. you know, right now, we want to just go public with nest protect and do a really great job. >> okay. >> the cost of production. do you actually make -- do you manufacturing, you outsource that? >> we do outsource. we buy the products all over the world, and assemble them in china. same for the thermostat. >> it will probably be $129, the

thermostat, re -- not the thermostat, but the -- >> the smoke alarm. >> the smoke alarm will be $129. >> the smoke alarm is $129. >> as you expand the product lineup, which we're imagining could happen in the future, will you potentially be the next apple store? i think about mall, they're so desperate for new kinds of products. is this something that ultimately a retail footprint could become a key player who? >> i'd love to see that. we're glad to be in the apple retail stores with the products. we can see this is a trend. it's not just dyi, but people with smartphone affinity, want to be where they shop for a smartphone. i hope one day to have retail, because you'd like to communicate a brilliant retail. lucky to have apple helping us today. >> all right. great story. thank you very much. up next, preet bharar is

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with his just released outlook for 2014, and why he is expecting a third of this year's gains. that and much more is ahead at the top of the hour, carl. >> thank you so much, scott. we're here with david favor who, i think, has some terms of the settlement between the doj and the u.s. air and amr. >> in fact, that is the case. we have a press release from the department of justice,out lining the settlement. six states attorney general and the district of columbia that joined in the doj objecting to this merger, we have a proposed settlement, one we expect is going to have -- will be accepted, has already been, and will be put in place. it is going to call for a good deal of divestitures at airports in boston, chicago, dallas, los angeles, miami, new york, and, of course, reagan national outside of washington, d.c. saying, at least what they say, is the opportunity for lower-cost carriers to compete

here. let me try to give you some quick specifics. all 104 air carriers' slot, slots not reserved for use by smaller commuter planes at reagan national, and rights and interests in other facilities at the airport necessary to support the use of the slots. that's part of the settlement between u.s. airways and american in terms of the divestiture slots at key airports. that had been the main focus. they'd have roughly 70% of market share at reagan national. also, 34 slots at la guardia, rights and interests and other facilities at the airport to support the use of the slots. they're also talking about two airport gates, and associated ground facilities at dallas love field, los angeles international, and miami international. so significant gate giveup, if you will. we knew reagan national was the key. let's not forget, of course, this stock is halted that the point. >> jetblue isn't. as soon as you mentioned trying to create more pathway for the

regional, now up 8%. it continues to climb from even when the word of this initially -- >> an expectation and phil lebeau and i were e-mailing, as well, hope you won't mind, that he was hearing from his sources, jetblue will be one of the main beneficiaries -- they're basically giving up all of reagan national. wow. >> basically 152-slot payers. if you fly out of reagan national, your life is about to change if you travel a lot. >> yeah. that is somewhat surprising. >> yeah. >> it would be quite that large. we knew they'd have to give up a lot, because they were going to represent so much of the traffic at that airport, carl. that's a big number. 34 slots at la guardia is not insignificant, as well, and that could play into the d.c./la guardia shuttle routes. >> sure, yes. >> and everything else we've come to know. u.s. airways having had that shuttle for so many years. so we'll see. that being said, let's go back and remind you, in february, the two agreed to a deal. that is, creditors of american

airlines and u.s. airways, under which stakeholders in amr would own 72% of the combined company. the stakeholders include, while they are largely the debtholders, about a 3.5% of the combined equity that would be given to former equity holders of amr -- the bankrupt equity. it's rare you see recovery value. there will be significant recovery value here, it would appear, for those who held amr shares through the bankruptcy. they're talking about -- they were talking about when they announced the deal $1 billion in synergies annually starting in 2015. $40 billion in combined revenues from the companies. i don't know how the synergy numbers will change as a result of the settlement. >> right. >> we haven't heard from the companies as yet. >> we're looking at an indication on lcc of 23 to 25, i believe. last was 24.10. so hard to imagine we're going to get a huge move either way. but the stock opens, we'll get over to pisani. in the meantime, i think the dow

jones has one headline here, guys, the combined companies sees -- essentially operating 44 fewer departures at reagan, 12 fewer at la guardia, and the story for the next couple of minutes, david, will be trying to determine which carriers will pick up the lion's share of the extremely valuable territory. >> yeah. extremely. >> yeah. >> highly trafficked, as we say, jetblue, kelly seemingly potentially -- >> if you look at the market reaction, southwest up better than 3%. spirit airlines 2.5%. j jetblue jumping 8%, maybe potentially more opportunity to seize on the outlines of the deal. >> and people ask, united, continental, as we said earlier, even u.s. air and america west, some of the other deals that were precursors to this deal, and why they sort of snuck under the radar. your point is, as some point, justice has to say, enough, and the hammer comes down. >> right. and it was unexpected. remember, in the middle of

august we heard from the doj and the two companies were literally a couple of weeks away from closing the transaction when they had this brought. they did manage to get it on the calendar fairly quickly in terms of a court case. it was scheduled for later this month. but the two had entered into mediation, so to speak, settlement talks quickly ensued, and here we have that settlement, itself. it will be interesting to see how the market looks at it, did they get the pound of flesh at doj and the states? >> and the tape is getting tougher. it's lockhart in comments indicating that tapering could begin as soon as next month. not the guy you typically hear that from. the dow is off 50 points. the outperformance of some of the names right now, all the more -- >> it comes on a day, of course, we know where the airline sector has come from over the past few years as the consolidation has taken place. today, delta trading at all-time highs -- you have to go to basically when it emerged from bankruptcy in april 2007 as they basically took out capacity, took out the number of competitors -- oil, although had

been a headwind, turning into a tailwind pretty quickly here. and now delta making $1 billion in a quarter, paying a dividend, things that airlines didn't do 10 years ago. >> i know. earning the cost of capital, which is something else we rarely saw the airline industry do. you know, united and comment, it's interesting you brought that up, because there were definitely some difficulties there, some slow-going in terms of the integration of those two. in this case, you've had an awful long time to prepare for this if you're american airlines and u.s. air in terms of it, but it doesn't mean the integrations are easy. we haven't heard from the companies. i'm hoping to shortly. they'll be able to close the deal in short order. and so, you will have -- it's not as though they have to wait anymore. they've gotten what they're looking for. so they will get this thing done very, very quickly. >> and there it goes. >> u.s. air opening up. >> bob, you have something? >> they're opening right now. and we were 23 to 25 indications, and we are waiting for this to open. right now, it should be just opening now.

the opening price at $23.59, it looks like. we opened $23.90. we opened 23.90. prior to that, the last trade was $24.10, so 20 cents below the last price prior to it being halted. the crowd dissipating. guys, back to you. >> all right, thank you very much, bob pisani. david cush, ceo of virgin america, and he joins us on kwrs first on cnbc" about the deal we have at hand. david, good morning. >> it's been interesting listening to you guys. you have a lot more information than i had when i walked into the studio. >> i mean, given that we understand you've been a little blind to the tales of being in that chair, getting miked up. can you give us a sense of what this means to virgin america? >> well, i think i'll have to look at what the settlement terms are. we filed a brief yesterday that basically went in and said slot divestitures alone at the big

airports doesn't address the competitive issues, that the biggest impact to consolidation has been on small and medium-sized communities, the amount of service and the ticker prices. the dca slots great, la guardia, great, what about the people in peoria and colorado springs? >> something, that's something regulators we assume will have their eye on. as for your quarter, operating revenue up 5.2. rasm up 9.4. how long can that last? >> well, we're opening for a leg longer. we've slowed down our growth, our route network is maturing. we've led the industry in rasm every month since october 2012, and it's rasm that propelled us to the margins that we had, the record profits, as well as an operating margin. better than our competitors. you know, american, united, jetblue being the primary competitors. >> and by rsm, we're talking

revenue per seat mileage, right? >> that's correct. >> how do we see companies trending more generally? are they the kind of sustainable growth that will keep you profitable even as consolidation continues? >> well, we think we'll be fine. you know, we're already kind of in the gate before the gate's slammed shut. you know, i think the next guy that wants to start an airline will have a difficult time. we had patient, deep-pocketed investors willing to invest hundreds of millions of dollars. i don't think you're going to find that very much going forward given the competitive environment we're operating in right now, though. >> you know, back to the news of the morning. at the time the doj opposed this merger a number of months ago, they pointed out that with it you would create the largest airline in the world that would result in four airlines controlling more than 80% of the u.s.'s commercial air travel market. i would assume that will still be close to the case, even with these gate give-ups. does that make it not a particularly competitive place to do business, then?

>> that's our opinion. you know, i think -- that's one thing we need to look at with the laws. they're not there to protect the rich and the powerful, you know? so stock prices pop, and that's nice. the real question is, are they preserving competition, and are they protecting the consumer? in our view, as we pointed out in our filing yesterday, is that this poses a lot of challenges to keeping a competitive environment out there. you know, that's really the dialogue we want to continue. you know, that we were subpoenaed by the justice department, you know, that we testified at their request. they've asked our opinion. and now we want to make sure that our opinions see the light of day. >> david, you have, i think it's fair to say, a bit of a cult following. if not the stock, then certainly on the flying experience on virgin america. people, i know who live out west and commute trans-con, they wouldn't fly anything else. there is something that as you expand, that somehow the level of service comes back a bit.

how do you maintain it and grow at the same time? >> well, i think you have to have the right priorities, and our priority is to maintain our culture and maintain a high standard of service. and then, to grow, also. but not to grow at the expense of those. so we've slowed things down. you know, we think we can scale this company up a bit more, keep the nice vibe we have on our airplanes and the nice vibe with the teammates. >> well, we appreciate you, certainly, riding the rails with us today on the fly. >> thanks for the briefing you guys gave me. [ laughter ] >> we aim to serve. david cush, the virgin america president and ceo, joining us this morning ad-libbing it, as we say in television. david, thanks. >> thank you. now, fresh off the insider trading case against s.a.c. capital, u.s. attorney preet bharara has been speaking live at the dealbook conference in new york, making some waves potentially. our own kate kelly is there, joining us with more. kate? >> kelly, thank you so much. u.s. attorney bharara moments

ago stepped off stage after once again sounding a very tough tone in terms of corporate malfeasan malfeasance, both banks and hedge funds. he was asked about the s.a.c. settlement and why steve cohen was not himself indicted, why there was not a strong case against him individually, and bharara very strongly said this criminal case for all intents and purposes are still open, and no protections for any individuals, certainly including him. he also defended the indictment of the corporation, which, of course, occurred in july, and very recently settled for $1.8 billion. he said sometimes it's important to charge institutions. it sends a message of deter rens. finally, he sounded a tough note for the banks, asked about a citigroup argument in court earlier this year, and the notion of collateral consequences that come with admitting to wrongdoing. he said, in general, these are often overstated. in fact, we need to bring these tough cases, we need to hold the banks accountable, and he thinks in general, kelly, banks and other wall street players tend

to order their compliance in a way of waving off future prosecutorial efforts, rather than just good reason to root out wrongdoing. >> sure. and a potentially important development there. kate kelly from the dealbook conference this morning. thank you. as we mentioned before, there's a look at lcc, by the way, currently down about 1%. as we mentioned before, former president bill clinton criticizing obama care. we now have that sound and our eamon joins us with that. >> former president bill clinton is not criticizing the entire scope of obama care in this interview with ozy.com, a website conducted over the weekend, and put up on their website today. former president bill clinton says that we're better off with the health care law than we were without it, but he wades into this very nedlesome debate over the rollout of it and what has happened to those people in the individual market who are now losing their health plans that were cheap and cost effective for them. take a listen to the former president, bill clinton. >> i personally believe even if

it takes a change in the law, the president should honor the commitment to federal government made to those people and let them keep what they got. >> that is politically challenging for the president of the united states, who has knocked on nearly that far in this debate. president bill clinton putting president barack obama here in a little bit of a political bock. obama saying to nbc's chuck todd just last week that he says we hear them, that is the people who are in the individual market and their complaints, and we're going to do everything we can to deal with folks who find themselves in a tough position as a consequence of this. so president clinton going a lot farmer than president obama, and you can expect gop critics will use the sound bite against president obama, guys. >> not just that. and then there's these reports that 40,000 to 50,000 have enrolled for private insurance on the federal marketplace, that's -- >> right. >> we're talking a sliver, a tiny fraction of what they expected at this point. >> that's right. and even within that, there is some debate over what the definition of enrolled actually is, carl. so those numbers have to be

looked at with a microscope, as well. >> the definition of "is" is. thank you. >> thank you, eamon. david, a busy hour. >> they'll close this deal in december, amr and u.s. airways, still saying $1 billion in synergies. >> all right. thank you for bringing it to us. let's hop over to headquarters and wapner and "halftime." >> thank you. knapp sacked. barclays maven on why your hopes for a big next year will be dashed. and the muni playbook. the popular investment, we'll game plan the best options ahead. we do begin with the truth about twitter. the stock has been trading publicly for four days, remains one of the market's most active names, and it seems everyone has an opinion on what the stock is really worth, including iac ceo barry diller who said this this morning. >> twitter's capitalization will turn over hundreds of times. if